​Huron-Kinloss establishes capital asset renewal and replacement reserve

Huron-Kinloss council has agreed to establish a capital asset renewal and replacement reserve, using the $900,000 in surplus from 2023.

At the budget meeting Feb. 16, treasurer Jodi MacArthur stated that historically, any surplus funds remaining at the end of the fiscal year have been automatically brought forward as revenue for the following year’s budget. Staff uses the tax mitigation reserve to flow the funds from year-to-year.

During the 2023 budget process, council made the decision to use only $20,000 of the surplus. That left $116,496.83 in the tax mitigation reserve which was included as revenue for the 2024 budget. That dollar figure fairly represents a typical surplus that the township has come to expect from its budget-versus-actual reconciliation.

Although the 2023 year end is not finalized, MacArthur said that the township is on track to have a significant surplus in the 2023 budget. There are several factors affecting it, specifically capital projects with unused contingencies, favourable winter weather, and capital work no longer required resulting from an insured loss at the Ripley-Huron Community Centre.

“While we await a few final invoices and verify project costs, the estimated surplus is more than $900,000,” said MacArthur. “Considering the impact that this would have on future budgets, staff is recommending that we establish a new reserve for capital asset renewal and replacement and that the 2023 surplus be set aside in this reserve to be used for future renewal and replacement of existing capital assets that are part of the council-approved asset management plan.”

She said the township’s asset management plan calls for an annual tax increase of 0.9 per cent specifically for the replacement of assets, so this surplus represents over nine per cent, based on the 2023 tax rate.

“We don’t expect that a surplus this large will become a regular occurrence and it makes sense to use this as an opportunity to advance our asset management plan objectives,” said MacArthur. “Reinvesting the surplus into asset renewal and replacement would bring our re-investment rate from 2.6 per cent as reported in the 2022 asset management plan, to 3.3 per cent, with the targeted rate calculated at 3.47 per cent.”

“If we were headed for a deficit, would there be indicators ahead of December?” asked deputy mayor Jim Hanna.

“Yes,” said MacArthur.

“Then, I believe we should create this reserve,” said Hanna. “We have a large surplus this year so we should put that into a reserve. We have a lot of unfunded liabilities, especially bridges.”

“There could be some carry-over of projects,” said MacArthur, “but we will carry over that money to the following year.”

“I like this report,” said mayor Don Murray. “I agree we should put that $900,000 into a reserve for future capital projects.”

Council approved establishing the new capital asset renewal and replacement reserve.